Martin Place hostage Katrina Dawson was told she could leave cafe

Katrina Dawson was a few steps from freedom, having been told by Man Haron Monis she could leave the Lindt Cafe just as his siege was beginning.

But rather than walk the few paces out the main doors to Martin Place, the respected barrister paused and asked the gunman if her friend and colleague Stefan Balafoutis could also leave.

Some 16 hours later, Ms Dawson was killed by shrapnel from police bullets as they stormed the cafe.

Mr Balafoutis - one of the first of two hostages to escape - has revealed Monis, shortly after pulling out his shotgun and announcing Australia was under attack by Islamic State, told Ms Dawson and Julie Taylor, also a barrister, that they could leave.

Katrina Dawson was killed by a bullet fragment. (Supplied)

Mr Balafoutis had been at the cafe meeting with both women.

"I heard the person I now know to be Monis say something about a bomb," he said on Thursday during testimony at the inquest into the December 2014 siege.

"A very short time after that I heard Monis say, 'you two can go' and it appeared that he was talking to Katrina and Julie," he said.

"And Katrina responded and ... I think she pointed at me and said, 'Can he come with us?'.

"Monis said, 'Yes, you can all go'."

The three friends then stood up and started walking towards the main doors of the cafe. Mr Balafoutis does not recall why they stopped.

"I don't at this point remember precisely what Monis said but I do remember that we all stopped in different places."

Five hours into the siege, Mr Balafoutis was the second hostage out of the cafe, following John O'Brien out the doors onto Phillip Street at about 3.40pm.

Mr Balafoutis told the hearing that early exchanges between himself and Monis convinced him he would be one of the first hostages targeted if the situation deteriorated further.

"One view I formed was I was very unlikely to be a hostage who was released by Monis," he said.

"... I felt that in the event that Monis was to shoot somebody because he was panicked with the police, there was a high chance it would be me."

Mr O'Brien told the inquest on Thursday he believed Monis "wasn't going to come out of there alive", recalling the gunman had said mid-morning he would "kill us one by one" because Tony Abbott wasn't answering his calls, and that the then-prime minister "would have blood on his hands".

A short time later, Monis ordered Mr O'Brien to move away from his seat, close to the doors that led to Phillip Street, and to lie on the floor.

Mr O'Brien bluntly refused, telling the gunman he was too old to lay on a hard floor.

The former international tennis player, then 82, was already planning his escape.

Earlier, the inquest was adjourned for about 20 minutes after hostage Fiona Ma broke down as she relived her final terrifying moments inside the cafe.

Sydney siege survivor Fiona Ma during a memorial service in December 2015. (AAP)

Ms Ma said she was stacking boxes against a door under orders from Monis when she heard glass shattering as six others were making their escape.

"He fired the gun and then he was reloading," she said.

"I thought if he's reloading, I can run out now."

Asked by counsel assisting the coroner, Jeremy Gormly SC, whether she feared being left alone in the cafe with Monis, Ms Ma responded: "Yes."